European banks are set for a windfall return on their investment in Visa Europe, as Visa Inc confirms a €21.2 billion deal for the European card network.
The transaction consists of upfront consideration of €16.5 billion in cash and stock with the potential for an additional earn-out of up to €4.7 billion payable following the fourth anniversary of closing. The deal is subject to regulatory approvals and is expected to close in Visa Inc.’s fiscal third quarter of 2016.
At the end of fiscal full-year 2015, there are more than 500 million Visa cards issued across Europe. The association is responsible for more than €1.5 trillion in payments volumes, processes over 18 billion transactions annually, and partners with approximately 3,000 financial institutions in 38 countries.
“We are very excited about unifying Visa into a single global company with unmatched scale, technology and services,” says Charles Scharf, chief executive officer, Visa Inc. “This transaction is beneficial for financial institutions, acquirers, merchants, cardholders, and other partners, as well as for our employees and shareholders.”
The owners of Visa Europe each own one share - giving them the same influence over the business - but the stakes have differential values. Barclays, for instance, is expected to reap £400 million from the initial EUR16.5 billion consideration, while Lloyds banking Group also values its stake in the hundreds of millions of pounds bracket.